Income disparity: M.I.T. economist shows how education is biggest factor

May 27, 2014 at 3:00 AM

David Autor - (M.I.T.)

Good news for the 1 percenters out there: The greatest amount of income disparity is not between the top 1 percent of earners and the rest — but among the 99 percenters themselves. And the biggest factor is education.

So says M.I.T. economist David Autor. And if you listen to his arguments — thoughts based in facts not political sound bites — you may agree.

On the other side, he said, real earnings of high school graduates fell 11 percent.

That’s why Autor feels the discussion should be about the 99 percent, not the top earners.

“There’s a real national debate about the significance and causes of inequality,” he said. “This public debate is dominated by the discussion of the top 1 percent. And the top 1 percent is important, but focusing on the top 1 percent conveys the message that the game is all rigged, that if you’re not in the elite stratum, there’s nothing to shoot for. And that’s just not the case.

“The growth of skill differentials among the other 99 percent is arguably even more consequential than the rise of the 1 percent for the welfare of most citizens.”

Want numbers? He’s got numbers.

Autor says the earnings gap between the median college-educated two-income family and the median high school-educated two-income family rose by $28,000 between 1979 and 2012.

This shift, he says, is four times as large as the redistribution that has taken place from the bottom 99 percent to the top 1 percent of households in the same period.

When asked for what accounts for inequality among the 99 percent, Autor was clear.

“The single most important factor is the rising return on postsecondary education,” he said in the interview. “That explains a lot of the growth and variance, and that is pretty well explained by supply and demand factors. There was a sharp deceleration in production of newly minted college graduates from about 1980 forward, and that led immediately to a growth in the skill premium. After 2005 there’s been an acceleration in production of college graduates, and you see the skill differential start to plateau.”

Autor was very clear on what needs to be done.

“If you had to give a person a single piece of economic advice, it would not be: Act like Gatsby and try to get into the top 1 percent. It would be: Go get a college education at a decent school,” he said.